Deferred Legal Fees

Plaintiffs’ attorneys may defer their fees when settling lawsuits. This allow firms to simultaneously defer taxes and stabilize cash flows. Please contact the firm for details and for customized quotes.

There are two important documents to consider adding to your practice regarding deferring legal fees:

• One is appropriate retainer fee language. This sample language makes it clear that a Structured Settlement is anticipated, how the fee will be calculated, which is normally the cost and it covers deferred legal fees. It also covers Medicare, tax advice, trusts and referrals.
• A second important document is a Periodic Payment Addendum to Mediation Stipulation, Plaintiff’s Structured Settlement Rules. This addendum allows one to settle for a fixed amount at a mediation and reserve the right to future payments for the client or legal fees.

IRS 2022 GLAM on Deferred Legal Fees

The IRS recently issued a non-binding memo that covered a hypothetical plaintiff lawyer who took highly questionable steps in a particularly aggressive deferral arrangement.

To maximize your protection, you may want to revisit your attorney-client fee engagement agreement regarding deferring fees and sample language is on this web site.

Here are links on write-ups on the IRS’ memo in case you’d like to share them with your tax advisor.

• NSSTA – FAQ on Attorney Deferral GLAM(10310920.5)
• Wood, Rob. Recent IRS Attorney Fees memo. (forbes.com Jan 2023).
• Babener. Tax Benefits Continue For Trial Lawyers. (forbes.com Jan 2023)

Major changes are not expected for a normal legal fee deferral using an annuity and future deferrals will take the memo’s thinking into account. Deferred legal fees remain available.

See Mr. Lesti’s paper on deferring legal fees. Deferring Legal Fees Using Structured Settlement Annuities.